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Standard: Wrenfield Home Insurance: which channel loses money?

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Written case: Wrenfield Home Insurance is a UK insurer whose home-insurance profit has shrunk, and management suspects one sales channel loses money. Using the data pack below, prepare a short written answer: where is the loss coming from, and what should Wrenfield do?

The prompt refers to Exhibit 1. After reading it, say: "Open Exhibit 1 now."

Format note: Difficulty: Standard. Format: written case, with a data pack. Industry: Insurance. Region: UK. Interview length: about 45 minutes. The company is fictional and all figures are illustrative. In a written case, lead with the answer on the first page, then show the numbers that support it.

2. Answers to clarifying questions

Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.

If asked: What is the goal?
Answer: Make every channel profitable at underwriting level next year, and keep it profitable if claims inflation continues.
If asked: Do the ratios include all costs?
Answer: The expense ratio includes commissions paid to price comparison websites.
If asked: Can we change prices freely?
Answer: No. UK rules in force since 2022 (FCA ICOBS 6B) say a renewal price must not exceed the equivalent new-business price for the same risk sold through the same channel, so plan within that.

3. The hypothesis a strong candidate states

Listen for an early, testable guess like this one. It does not need to match word for word.

Policies sold through price comparison websites usually carry high acquisition costs and attract price-sensitive customers. My hypothesis is that this channel makes the loss.

4. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Combined ratio by channel
- Premiums by channel
- Key: Loss ratio and expense ratio by channel
- Underwriting result by channel
- Sensitivity to claims inflation

Exhibit 1

The prompt uses this exhibit, so the candidate opens it right after you read the prompt ("Show exhibit 1" on their screen).

Wrenfield home insurance by sales channel, last year (illustrative)

Wrenfield home insurance by sales channel, last year (illustrative)
Channel	Policies	Average premium (GBP)	Loss ratio (%)	Expense ratio (%)
Price comparison websites	300,000	250	72	30
Direct	200,000	300	60	20

So-what

Comparison-website policies lose money on both claims and costs; direct policies are profitable.

5. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Premiums: comparison websites
What a strong candidate does: 300,000 policies at GBP 250.
Premiums (GBP a year): 300,000 × 250 = 75,000,000
Step 2: Premiums: direct
What a strong candidate does: 200,000 policies at GBP 300.
Premiums (GBP a year): 200,000 × 300 = 60,000,000
Step 3: Combined ratio: comparison websites
What a strong candidate does: Loss ratio plus expense ratio.
Combined ratio (%): 72 + 30 = 102
Step 4: Combined ratio: direct
What a strong candidate does: Loss ratio plus expense ratio.
Combined ratio (%): 60 + 20 = 80
Step 5: Result: comparison websites
What a strong candidate does: Premiums times (1 minus the combined ratio).
Underwriting result (GBP a year): 300,000 × 250 × (1 - 1.02) = -1,500,000
Step 6: Result: direct
What a strong candidate does: The direct channel is strongly profitable.
Underwriting result (GBP a year): 200,000 × 300 × (1 - 0.8) = 12,000,000
Step 7: The whole book
What a strong candidate does: Both channels together still earn a profit, which hides the loss-making channel.
Whole-book underwriting result (GBP a year): 300,000 × 250 × (1 - 1.02) + 200,000 × 300 × (1 - 0.8) = 10,500,000
Step 8: Curveball: claims inflation
What a strong candidate does: Interviewer: "Repair and building costs are rising; assume claims rise 10 percent next year." The comparison channel's combined ratio becomes 72 x 1.1 + 30 = 109.2 percent and direct's 60 x 1.1 + 20 = 86 percent. The whole book then earns:
Whole-book result after inflation (GBP a year): 300,000 × 250 × (1 - (0.72 × 1.1 + 0.3)) + 200,000 × 300 × (1 - (0.6 × 1.1 + 0.2)) = 1,500,000

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The loss comes from policies sold through price comparison websites, and Wrenfield should reprice that channel by risk before claims inflation erodes the whole book. First, the comparison channel brings GBP 75 million of premiums from 300,000 policies but runs a combined ratio of 102 percent, a loss ratio of 72 plus an expense ratio of 30, so it loses about GBP 1.5 million a year. Second, direct brings GBP 60 million from 200,000 policies at a combined ratio of 80 percent and earns about GBP 12 million, so the whole book still earns about GBP 10.5 million, which hides the problem. Third, the gap comes from both claims and costs: the comparison channel's loss ratio is 12 points higher and its expense ratio 10 points higher. The problem will grow: if claims rise 10 percent, the comparison channel reaches about 109 percent while direct stays near 86 percent, and the whole book's result falls to about GBP 1.5 million. Wrenfield should price comparison-website policies more closely by risk (property type, location, claims history), stop bidding for the highest-risk segments, and shift marketing toward direct sales, while making sure renewal prices never exceed new-business prices for the same risk in the same channel, as the rules require. The main risk is that higher prices lose comparison-website volume and spread fixed costs over fewer policies. As a next step, analyze loss ratio by property type and postcode for the comparison channel and test price changes on a sample of quotes.

Risks a strong answer names: Higher prices will lose some comparison-website volume; Fixed costs spread over fewer policies.

Next steps: Analyze loss ratio by property type and postcode for the comparison channel; Test price changes on a sample of quotes.

Strong versus weak

A strong answer

Led with the answer, computed combined ratios by channel, and tested claims inflation before recommending risk-based pricing within the rules.

A weak answer

Averaged both channels together, found an overall profit, and missed the loss-making channel.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.